Basics to Consider Before Writing Nondisclosure Agreements

If you have business secrets to protect, you might want to use a confidentiality policy. That will inform your employees and other stakeholders what’s important and what you want to keep in confidence.

To assure privacy, you might also consider a nondisclosure agreement (NDA) with your employees and strategic partners. They are typically appropriate and lawful.

Assessing your situation

Before you decide what to do regarding an NDA, assess your situation, for instance:

Do you have to protect proprietary information? Such information might be unique marketing and sales strategies, proprietary research or maintenance of confidential data belonging to your customers that need to remain private.

Do you have to stop leaks? You don’t want employees to be careless with your proprietary information. So, convey your concerns about confidentiality.

Take precautions such as only giving information to certain employees on their need-to-know basis and discipline anyone who violates your trust.

Do you have to guard against theft? You will probably need to inform your employees to keep your proprietary information secret. They need to know you’re serious enough to use lawful means to back up our policy.

For legal success, you have to make certain your information is not publicly available outside your company.

Noncompete agreements

In addition to issuing a confidentiality policy or an NDA, you might also consider a noncompete agreement with key staff.

Basically, a noncompete agreement is usually a contract designed to keep proprietary information secret and prevents an employee from working for your competitors for a certain length of time.

However, for any chance of success with a noncompete, the company must demonstrate it’s reasonable and necessary to guard against unfair competition.

Note: Consult a good local employment attorney to make certain a noncompete is valid in your situation.

Each state has its own laws about whether a noncompete is lawful. Many states restrict or don’t enforce noncompete agreements usually because they’re too broad.

Some will enforce some provisions in business-trade secrets but not the work restrictions.

The good news is that companies often prevail in court if an employee signs a noncompete and gets an extra payment before the start of employment. That’s because the court will rule the noncompete was part of the employment package.

However, if the agreement is signed after the start of employment and without extra payment then the pact is likely to be invalidated.

Also, the agreement will likely not be upheld depending on the states where the company is domiciled and where the employee is situated. If one of the two states restrict noncompete agreements, then it likely won’t be upheld.

In some cases where companies have terminated employees for refusing to agree to a noncompete, the employers have been found guilty of wrongful termination and of unfair trade practices for acting in bad faith to enforce a noncompete.

Determining feasibility of an NDA

To determine the likelihood of prevailing in court if you ask your employees to sign an NDA, consider some scenarios:

Your information must not be available outside your business. Your information must be purposely limited within your business.

You must take logical precautions to protect the confidentiality of your information.

The information must be valuable to your business and to your competitors.

To develop your information, it must cost you considerable resources and time.

It must be difficult for competitors to either get or develop the information.

Before you create a confidentiality policy and/or an NDA, be sure to state what is confidential and propriety. Provide some specifics. And be sure that people understand that the information is not limited to your example specifics.

“Confidentiality is a virtue of the loyal, as loyalty is the virtue of faithfulness.”

-Edwin Louis Cole

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional.Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, pleasecontact Terry.